Emerging Markets
Emerging markets encompass regions with significantly diverging fundamentals and a broad range of credit challenges—from persistent inflation and tightening financing conditions to sluggish domestic demand and geopolitical tensions.
How We Rate Emerging And Frontier Markets
Emerging and frontier markets are strategically positioned to drive global economic growth through the expansion of their domestic markets.
Emerging and frontier markets will play a crucial role in shaping the global economy and driving growth, contributing approximately 65% of global economic growth by 2035. Frontier markets will play a prominent role in this growth due to their favorable demographics—but face significant challenges from persistently high inflation and political uncertainty.
Monthly Highlights
The War's Scope And Duration Shape Risks
The Middle East war has already pushed Brent crude to about $90 per barrel, underscoring that the Strait of Hormuz is a key global risk point. Credit implications will depend critically on how long and how widely the Middle East war spreads.
Large net energy importers in emerging markets (EMs) are most exposed to higher oil and gas prices. Economies with weaker external positions could face stronger capital outflow pressure, while persistent price increases would also lift inflation and, where subsidies exist, add to fiscal strains.
The Middle East war has intensified stress on EM currencies through safe-haven demand for the U.S. dollar and shifting interest rate expectations. Along with higher oil prices, weaker foreign exchange could amplify inflation pressures and prompt central banks to maintain a tighter policy stance.
The U.S. tariff overhaul changes the relative tariff position of most EMs, with Brazil among the largest beneficiaries, but it does little to reduce broader trade uncertainty. While the near-term macroeconomic impact may be limited in some cases, the risk of further tariff action remains elevated.
EM benchmarks generally decreased in February, while corporate borrowing costs recently increased on U.S. trade policy uncertainty and the Middle East war, amid the widening in corporate spreads. This led to a three-year low monthly issuance volume, with Malaysia representing the unique silver lining. Two fallen angels were recorded in the month.
Latin America
Credit Trends
March 03, 2026
Mexican Development Banks To Ramp Up Lending As A Tool Of Economic Policy
S&P Global Ratings expects Mexican development banks to continue taking a more relevant role over the next few years. This is based on Mexican government policy priorities.
The banks currently benefit from sufficient capital cushion and sound credit fundamentals to support expected growth.
Strategic lending allocation and collaboration with commercial banks and private agents will be fundamental for adequate loan portfolio performance and to achieve government policies.
EM EMEA
Maritime chokepoints around the Middle East
March 26, 2026
Credit Conditions Europe Q2 2026: Supply Strains, Credit Pains
Overall: Geopolitical risks cloud the European macro-credit outlook, which started the year fairly positively. Supply chain disruptions could increase inflation, tighten credit conditions, and impair earnings, particularly for energy-intensive industries. We therefore lowered our 2026 eurozone growth forecast to 1% and raised our inflation forecast to 2.4%.
Risks: The Middle East war, particularly the disruption of the Strait of Hormuz, affects supply chains and caused an energy supply shock. Trade fragmentation and political populism increase uncertainty, while AI disruption and cybersecurity threats are emerging structural challenges.
Ratings: Negative sector outlook biases remain, particularly in chemicals and autos. While upgrades dominate among financial institutions, downgrades among speculativegrade nonfinancial corporates have picked up in recent weeks, notably in the chemical sector. In the current environment, we do not rule out that the European high-yield default rate could rise toward our pessimistic forecast of 4.5% by the end of 2026.
EM Asia-Pacific
China and Japan remain the biggest borrowers in Asia-Pacific
Credit Conditions
April 01, 2026
Credit Conditions Asia-Pacific Q2 2026: Choke Point To Stress Points
Energy availability--not prices--is the biggest threat to Asia-Pacific credit. A widening Middle East conflict and the effective closure of the Strait of Hormuz are detrimental to the region, given its deep reliance on Middle Eastern energy and limited reserves. We view supply-chain disruption risk as high and worsening.
External shocks are colliding at the same time. Geopolitical tensions and volatile U.S. trade policy are accelerating supply-chain and trade fragmentation, amplifying the risk of higher inflation. Central banks' monetary easing could stop. Corporate borrowers may face the dual setbacks of slower revenues and higher interest costs. We have raised the financing risk trend to elevated and worsening.
China's domestic challenges persist. Sticky property woes and soft consumption continue to constrain the profitability of Chinese corporates. However, amid signs of reflation and still-strong exports, we lowered the risk around China's economy to elevated and unchanged.
AI and private credit are compounding tail risks. A reset of business models and emerging strains in private credit markets could raise contagion spillovers. Valuation corrections and shifts in financing conditions may add volatility
Frontier Markets
Sovereigns
21 January 2026
Frontier Markets Quarterly Highlights: Growth And Financing Conditions Should Remain Resilient In 2026
The August increase in U.S. tariffs has significantly raised the effective tariff rates for most frontier markets (FMs), with some exceeding 25%. Cambodia and Nicaragua are particularly vulnerable due to their high export shares to the U.S.
That said, many FM economies are driven by household consumption, at more than 70% of GDP in most cases, as opposed to ongoing global trade developments. We expect real GDP growth of about 4.4% for FMs in 2026, compared with 4.3% in 2025. Risks to our outlook include worsening security conditions, lower commodity prices, and a slowdown in global growth.
Favorable financing conditions for FMs continue, with FM index yields falling to 9.0% and risk premiums hitting alltime lows. Nonetheless, the risk-on market has downside potential if geoeconomic uncertainties intensify. Cumulative government-related bond maturities are set to reach $90 billion by the second quarter.
FM rating actions showed positive momentum in the past quarter. We took positive rating actions on Ghana, Zambia, and Uzbekistan, while we downgraded Senegal due to its debt position. Our upgrade of Uzbekistan led to rating actions among nonsovereigns, with 71% of our ratings in the region showing stable outlooks.